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rue21 inc. Reports Operating Results (10-Q)

September 01, 2011 | About:
10qk

10qk

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rue21 inc. (RUE) filed Quarterly Report for the period ended 2011-07-30.

Rue21 Inc. has a market cap of $611.5 million; its shares were traded at around $25.06 with a P/E ratio of 17.6 and P/S ratio of 1.

Highlight of Business Operations:

During the second quarter of 2011, our net sales increased 20.9%, or $29.8 million, to $172.8 million as compared to $143.0 million in the second quarter of 2010. This increase in net sales was due to an increase of approximately 14% in the number of transactions, primarily driven by new store openings during fiscal year 2011. Net sales also increased due to an increase of approximately 5% in the average dollar value of transactions. The average dollar value of transactions increased due to an increase in average unit retail offset by a slight decrease in units per transaction. During the second quarter of 2011, we opened 34 new stores with 1 store closure compared to 31 new stores and 1 store closure in the second quarter of 2010. Our comparable store sales decreased slightly at 0.3% in the second quarter of 2011 compared to a decrease of 1.6% in the second quarter of 2010. There were 556 comparable stores and 154 non-comparable stores open at July 30, 2011 compared to 469 and 126, respectively, at July 31, 2010.

Depreciation and amortization expenses increased by $1.0 million to $6.4 million in the second quarter of 2011 as compared to $5.4 million in the second quarter of 2010. Depreciation and amortization expense was flat as a percentage of net sales at 3.7% during the second quarter of 2011 and 2010.

The provision for income taxes increased $0.7 million to $4.7 million in the second quarter of 2011 as compared to $4.0 million in the second quarter of 2010. This increase was due primarily to the $1.9 million increase in pre-tax income. The effective tax rates were 38.0% and 38.7% for the second quarter of 2011 and 2010, respectively. The lower effective income tax rate for the second quarter of 2011 was primarily due to a discrete item the Company received in state tax credits and disqualifying dispositions of stock options.

Selling, general and administrative expense increased 23.9%, or $18.2 million, to $94.2 million in the year-to-date 2011 period as compared to $76.0 million in the year-to-date 2010 period. As a percentage of net sales, selling, general and administrative expense increased to 27.3% in the year-to-date 2011 period as compared to 27.1% in the year-to-date 2010 period. During the year-to-date 2010 period, we incurred $0.6 million in expense related to our secondary offering of common stock completed in March 2010. Excluding the impact of these secondary offering costs, selling, general and administrative expenses as a percentage of net sales, would have decreased to 26.9% in the year-to-date 2010 period. Store operating expenses increased by $14.4 million in the year-to-

Depreciation and amortization expenses increased by $2.2 million to $12.5 million in the year-to-date 2011 period as compared to $10.3 million in the year-to-date 2010 period. The increase in depreciation and amortization expense was primarily due to the continued opening of new stores and conversions as well as distribution center infrastructure investments. Depreciation and amortization expense decreased as a percentage of net sales to 3.6% for the year-to-date 2011 period as compared to 3.7% in the year-to-date 2010 period.

The provision for income taxes increased $2.7 million to $10.9 million in the year-to-date 2011 period as compared to $8.1 million in the year-to-date 2010 period. This increase was due primarily to the $7.8 million increase in pre-tax income. The effective tax rates were 38.6% and 40.0% for the year-to-date 2011 and the year-to-date 2010 periods, respectively. The lower effective income tax rate for the year-to-date 2011 period was primarily due to a discrete item the Company incurred for $0.6 million in expense related to our secondary offering of common stock completed in March 2010.

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